The signs are that the policy and payment incentives around value-based healthcare are accelerating now and may soon become much clearer, a nationwide physician leader told attendees at the Beverly Hills Health IT Summit, being held in Los Angeles this week and sponsored by Healthcare Informatics. Don Crane, the president and CEO of the Los Angeles-based APG (America’s Physician Groups), a nationwide association of more than 300 physician groups involved in risk-based contracting in healthcare, though participation in accountable care organizations (ACOs) and in all types of value-based contracting, which his association refers to as coordinated care.

Crane, whose organization counts member physician groups in 43 states, the District of Columbia, and Puerto Rico, told his audience at the Sofitel Hotel Los Angeles at Beverly Hills that he believes that the most senior federal health officials—at the Department of Health and Human Services (HHS), at the Centers for Medicare and Medicaid Services (CMS), and at the Center for Medicare and Medicaid Innovation (CMMI), are planning to move forward rapidly and decisively to push as many physicians and physician organizations as possible into risk-based contracting, through a variety of means. Statements from HHS Secretary Alex Azar, CMS Administrator Seema Verma, and CMMI director Adam Boehler, have made it clear that plans are afoot to accelerate the transition from fee-for-service payment to risk-based and value-based reimbursement, he said.

Don Crane

Speaking of his own organization, Crane said, “What distinguishes us from similar trade organizations is that capitation is the preferred model. Probably half of my members are already there in terms of professional or global risk. And what we’re developing is the antithesis of fee-for-service [healthcare delivery]. We’re very much central to the value movement.” Further, he said, “Capitation is the destination” of the current evolution of the U.S. healthcare system. “Groups everywhere are experimenting with Medicare ACOs, other kinds of programs and projects,” he noted, adding that physician groups are advancing forward organically through a series of phases, “starting with fee-for-service with some sort of bonus-based quality incentives, moving next to some sort of shared savings program, then shared-risk, leading to primary care-based capitation or shared risk, and ultimately to global capitation or full risk.”

Further, speaking of APG’s member organizations, Crane told his audience, “All of us see capitation as the destination; our hair is on fire about it; we’re excited about it. We want to move the system to that model, because it produces higher quality at lower cost. As you all know, we’re at 18 percent of GDP right now, with really poor results, and we want to change that, through coordinated care.”

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Speaking of the mid-term legislative elections that had taken place three days earlier, Crane told his audience, “This election on Tuesday means a number of things: for one thing, repeal and replace is dead, yes,” referring to efforts to eliminate the Affordable Care Act over the past two years. “The big takeaway for us in the healthcare industry is the extent to which the ACA has been cemented into our landscape, right there with Medicare and Medicaid,” he said, referring to the legislation, which had been signed into law by President Barack Obama in March 2010. “So with the Democrats controlling the House, there’s nary a chance that it will be repealed or replaced in the next two years. Also, in three states, initiatives were passed that would expand Medicaid.”

Asked by an audience member about the sustainability of the state-based health insurance exchanges, Crane said, “The notion is that, if you don’t get everybody to pay into the risk pool, how can you get everyone covered? The answer is, time will tell. People have worried that the repeal of the mandate would undermine the exchanges; that hasn’t happened. And in fact, premium costs have seen a fairly moderate risk in the past year of about 2 percent.”

Meanwhile, Crane said, moving into the core of his presentation, “Whither and what of the value movement? The value moment got started with the ACA in 2010 with ACOs. More recently, in 2015, MACRA, the Medicare Access and CHIP Reauthorization Act, was passed, and that gave us MIPS [the Merit-based Incentive Performance System] and APMs”—alternative payment models. “So a big tailwind was put behind the whole value movement, where physicians and physician groups would be graded on quality measures, and that so that was brought into the fabric in 2015. And we’re well into the value landscape now.”

Documented evidence of the value of coordinated care

What’s more, Crane told the audience of healthcare leaders, “the announcements that you’re hearing from Alex Azar”—the Secretary of Health and Human Services—“are ones in which he repeatedly says that one of their missions is to accelerate the value movement.” Indeed, he said, referring to the proposal by CMS and referred to as “Pathways to Success,” “We’ve seen a pending rule soon to be made final, that will basically push these 400-plus Medicare ACOs much more rapidly into downside risk. And that’s hard to do unless you’ve got a sophisticated system with rich informatics. Many will be afraid of that, but those who are afraid will be winnowed out, and it will leave a more robust, stalwart cohort.”

And, Crane continued, referring to Adam Boehler of CMMI, “We’ve participated in a number of roundtables with Adam Boehler; in fact, I’m seeing him again next Thursday. We haven’t seen any pending rules yet, but we need to get ready for some bold moves in Medicare, where they accelerate the movement. One thing that’s gotten a lot of attention is delegating large portions of the country to players that want to take risk, and then turn around with physicians and hospitals to deliver care to employers like Google. That would allow for prime contracting that would lead to subcontracting for the delivery of care. Much of it is conjectural, but I think it’s coming. With regard to their request for proposals on direct contracting a few months ago—one can see, coming in from out of the mist, as you read the tea leaves, you can see some profound changes in original Medicare that will accelerate this forward.”

Crane went on to review in some detail the results of a study released on March 1 of this year. As the press release announcing those results noted, “Health care quality and cost for commercially insured Californians varied dramatically in 2015, indicating that where you live affects the care you receive and how much it costs, just one of the new findings from the California Regional Health Care Cost & Quality Atlas. Developed by the nonprofit IHA, in partnership with the California Health Care Foundation (CHCF) and California Health and Human Services (CHHS) Agency, the Atlas is the state’s source of comparable performance information about the quality and cost of care provided to 29 million Californians.”

Further, the March 1 press release noted, “The second edition of the Atlas brings together 2013 and 2015 multi-payer data by geographic region—including commercial insurance, Medicare, and Medi-Cal—on more than 30 standardized measures of health care quality, cost, patient cost sharing and utilization to help purchasers, health plans, and policymakers target performance improvement initiatives. An IHA fact sheet provides more details about the Atlas and measures. In 2015, clinical quality varied across the state’s 19 geographic regions by an average of 25 percentage points and costs ranged from 22 percent below to 29 percent above the statewide average. These differences mean: If care for all commercially insured Californians were provided at the same quality as top-performing regions, nearly 205,000 more people would have been screened for colorectal cancer and 31,000 more women would have been screened for breast cancer in 2015. [And] If care for all commercially insured Californians were provided at the same cost as observed in San Diego―a relatively high-quality, low-cost region―overall cost of care would decrease by an estimated $ 2.6 billion annually, or about 5 percent of the $ 55 billion total cost of care for the commercially insured.”

That study’s press release included a comment by CHHS Secretary Diana Dooley, who noted that “Increasing transparency is essential for improving quality, lowering cost and gaining consumer confidence. Atlas 2 shows where quality and cost are trending in the right direction and where there is room for more improvement.”

As Crane noted at the Summit, “This was a meta-study commissioned by the Secretary of State for California and the California Health Care Foundation. It aggregated the data of 29 million Californians participating with 10 of the major health plans in CA, all the physician groups. The study had two purposes: one, it looked at geographic variation; the other focus was to compare and contrast the two predominant models in California and elsewhere—fragmented, fee-for-service PPO, compared to capitated, integrated HMO. They were looking at products, but that’s how they looked at the delivery and payment models under those products.

There were three domains—familiar HEDIS measures in the quality domain, which was the first domain; hospital utilization measures in the second domain; and then third and finally, and this is where this is such a distinguishing study, total cost of care—not just premium, hospital fees, physician fees, but also the patient’s share of the premium pay and of co-pays and deductibles. So you get quality and spend, so you have what you need to get to the question of where the value is,” when evaluating data from all those domains.

“So you see 19 different contracting regions through CoverCalifornia, the California exchange,” Crane noted, as he shared a slide with visual results from Atlas 2. “The chief thing is that you should look at the little blue pyramids, commercial HMO, and the orange dots, commercial PPO results. The HMO measures show HMOs outperforming PPOs on quality—very important,” he said, referring to the slide, which showed all the blue pyramids rising above the orange dots. “The chief takeaway here is that PPO products are costlier nearly everywhere, with a few small outliers; and we’re not talking about premium here, but about total cost of care. HMOs—representing capitated, integrated delivery models—performed better on cost and quality across the board.”

Importantly, Crane noted, with regard to quality outcomes among Medicare Advantage-enrolled seniors in California over those enrolled in basic Medicare, “Medicare Advantage outcomes were all superior to those in original Medicare.” Indeed, he noted, “Medicare Advantage outperforms fee-for-service Medicare on hospital utilization, on all-cause readmissions, on ED use, on length of inpatient stays. In short, all Medicare Advantage is shown to be of higher quality and lower-cost than original Medicare—and, importantly, our APG members outperformed everyone else on all of these measures.”

Further, Crane said, “Capitated, integrated care delivery was found to be 14 points higher in quality, and 9 percent lower in total cost of care in commercial health insurance products. And there was $ 4,450 less total cost of care PMPY [per member per year] in Medicare Advantage in California.”

As the Atlas 2 report itself notes, “In 2015, HMO products delivered clinical quality that averaged 14 percentage points higher than PPO products at an 8% lower total cost when member cost sharing is included. PPO members paid, on average, $ 620 more out of pocket for care in 2015 than HMO members. HMO hospital utilization was generally higher than PPO even though total cost was lower. Given HMO products typically offer networks composed of integrated providers to a greater degree than PPO products, integrated care (HMOs) offered superior value.”

What’s more, Crane said, “Atlas 2 confirmed a total spend of $ 16,000 a year on average for seniors; that’s 25 percent lower than in original Medicare. Think of the savings that would be achieved if we overlaid this across all the seniors in California or the United States. This is proof positive of a better model, the model of the future, and one on which we will depend on your participation and your leadership.”

APG’s initiatives around advanced payment models

Crane went on to describe initiatives taking place at APG; in particular, he pointed to the Risk Evolution Task Force, and Third Option, two programs that he said show the way to the future for physician groups and for coordinated care. “The Risk Evolution Task Force,” he explained, “is essentially a benchmarking program mostly for our Medicare ACO and Next Gen participants. In the past, twice, I tried to initiate benchmarking programs, in which members had to submit data.” The mechanics of doing so turned out to be difficult to sustain those past initiatives, he conceded. “But moving forward, this data will be freely available in Medicare off 1500 forms.” Meanwhile, he continued, “Third Option is our proposal that we think will see light of day in a month or so. A few months ago,” he said, “CMMI issued an RFI on director-provider contracting. We said, we have the model. Direct contracting with CMS and a sophisticated qualifying medical group. It would have a capitated payment model. The benefit design would be a hybrid of Medicare Advantage—integrated, capitated; but it would be like original Medicare in that enrollees would still have freedom of choice; but the catch is if you went out of network, you’d pay more. It’s very much like a point-of-service model. So it drives patients in network. We think we’ll see a model that bears some resemblance to this model, coming out of CMMI. That will be a red-letter day for us.”

Importantly, Crane said, “We see a model like this as offering the antidote to single-payer proposals,” including proposals that governor-elect Gavin Newsom indicated interest in, during the gubernatorial campaign that he won on Tuesday. “We’ve been dialoguing with Gavin Newsom,” he reported, “and we’ve said, look, look, if you were to take the capitated, integrated model and spread it across all of California, the savings would be more than the savings needed to generated universal coverage. All we would need would be subsidies and other support.”

In response to a question from the audience about physicians’ reactions to practicing under capitation, Crane said, “The overarching reaction has been extremely good. Physician burnout nationwide is driven by the fee-for-service model. The fee-for-service physician is a hamster on a wheel, continuing to try to see more and more patients, as Medicare payments go down. Contrast that to where you can focus on the patients with highest needs. Take WellMed in Texas,” Crane said, referring to one APG member group, WellMed Medical Group, based in the Dallas area. “Their PCPs are seeing 15 patients a day, and they want to drive that down to 13, using a multidisciplinary team of clinicians and others to drive down the levels of work” to allied health professionals, in order to relieve some of the burdens physicians are facing in their work lives. “And so one of the byproducts is higher levels of physician satisfaction. So just as this model produces results around the Triple Aim, a byproduct is improved physician satisfaction.”

Finally, in closing his address, Crane addressed the healthcare IT leadership audience directly, saying, “You guys are so central to the management of a population. Informatics has been important in the FFS world to a certain extent. But to a physician group being paid through capitated, needs to know who’s’ diabetic, who’s being admitted to hospitals, who will become sicker in the next year, all of that depends on informatics. So I see our fates as inextricably linked.”